Report Shines New Light on Charter School Funding

The Wisconsin Policy Forum has released a new comprehensive study of charter school funding in Milwaukee. The Forum’s study: A Teachable Moment, understanding the complexities of charter school financing in Milwaukee, contains a wealth of data and insights into the growing independent charter school sector and how it interacts within the overall Milwaukee education landscape. 

View several key takeaways that MMAC believes can help start a much-needed discussion on substantive policy changes needed to improve educational performance for all children in Milwaukee: 

Independent Charter schools are public schools.
In MPS, independent charter schools are called Non-Instrumentality Schools (NIC’s). NIC’s are authorized by the MPS school board under a under a contract that requires the charter school to provide all services typically provided by a district including financial management, HR, talent recruitment, communications, legal compliance, etc. The schools have freedom to develop their mission, educational program, organizational structure, staff, and budgeting. As public schools they cannot charge tuition, are required to be non-sectarian, adhere to authorizer rules; and be subject to federal laws governing civil rights, discrimination and labor standards; follow state law covering instructional staff licensing.
 
Parents are choosing independent charter schools in MPS.
7,315 students attended independent charter schools in MPS last year, that represents a 250% increase in enrollment since 2010. At the same time enrollment in MPS traditional schools has declined 15%. Charter schools have been a positive addition to schooling options in MPS.
 
Independent Charter Schools benefit MPS financially. 
Using just MPS’s base operating revenue (per pupil revenue limit, plus per pupil categorical aid) independent charter school enrollment brought in $77M. After making per pupil payments to independent charter schools in MPS, the district netted $16M. In addition, the district received additional federal funding, and state categorical aid based on this student population. MPS also avoids a variety of costs that it would otherwise incur if their independent charter schools were district schools, as charter employees are not district employees. MPS does not have to recruit, hire, and provide HR and other services to charter teachers. Additionally, MPS does not accrue long term retirement/pension and health care legacy costs associated with charter staff. Filling existing facilities with charter operators also reduces MPS maintenance costs. Many students choosing an independent charter school were not previously attending a district school. Without a compelling charter school option, parents may make and have made choices to move to non-district schools. 

The resulting financial impact on the district could be significant: 
Students choosing other non-MPS school                 Revenue lost
100%                                                   $77 million
  75%                                                   $58 million
 50%                                                   $39 million
  25%                                                   $19 million
 
Funding for independent charter school students is inequitable.
Each student in MPS including each independent charter school student included in MPS count generates $10,572 in state and local taxpayer funding for MPS. However, independent charter schools in the district receive on average $8,220 of this per student funding leaving these schools to operate with 22% less revenue.

Charter school contracts lack transparency.
MPS contracts with its NIC Schools (independent public charter operators) are neither uniform, nor transparent. There is not a clear public presentation of direct and central school costs including administrative, infrastructure, and legacy. This lack of transparency makes it difficult align administrative fees to the costs for all schools, including independent charters.

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MMAC POlicy options/recommendations

1. Increase charter per pupil to the revenue limit amount its host district receives. 
   As a charter authorizer, MPS is authorized to receive a 3% administrative fee on the $8,395 statutory per pupil funding for a charter school student, lowering the actual funding to the charter school on average to $8,220. However, this 3% figure is misleading. Because the district receives the full revenue limit amount of $10,572 per pupil for each charter school student, the effective administrative fee withheld by the district is over 22%.  Establishing the baseline funding level for all charters – NIC and 2r Charters – to be equal to the funding the district receives for each pupil would create greater funding equity across the system, and in the case of NIC’s make the money that gets to the charter classroom more accurately reflect the legislative intent of limiting a charter authorizer’s administrative fee to 3% of per pupil funding.
   
2. Make NICs their own LEA like 2rs Charters authorized by other entities – City, UWM, etc.
   This change would give NIC schools more control over the funding their students receive via categorical aids and title funds.   It would also create a direct line of accountability to the schools for the use of the funds rather than having those funds run through the MPS administrative structure.  
3. Transparency:  Require MPS to provide a detailed audited breakdown of any overhead costs/services they are providing NIC schools.  
   This added level of transparency will improve efficiency and trust by verifying and specifically articulating the district overhead costs MPS assigns to the operation of NICs.   Alternatively, consider recognizing economies of scale by creating a simple, transparent fee structure of 3% for schools with under 500 students; 2% for schools with 500-999 students and 1% for schools with more than 1000 students.
4. Facilities Reforms.
   MPS control over school buildings allows them to use access to educational facilities as contract leverage over NIC charter schools. Meanwhile, many district school buildings remain vacant or underutilized.  Educational facilities should be placed in community trust and be made available for sale, co-location, or lease at a minimum established per square foot level that is established by the community trust. For schools that are not able to access public school buildings to educate public school students the state should consider supplemental facility funding and access to a low-cost loan pool or credit enhancement.
5. Appeals Process
   Establish the State Charter School authorizer as an appeals board for all charter applications, renewals, and to arbitrate district lease arrangements as necessary.